Market: US indices failed to turn the tide

(CercleFinance.com) - It was the final session before the "4 Witches" day (which, for most managers, will bring fiscal year 2024 to a close), and despite better-than-expected GDP and year-end "balance sheet dressing" (which consists of pulling up the stocks that have risen the most since January 1), the US indices failed to turn the tide upwards, or even materialize a symbolic rebound.


After laboriously trying to recover from their -3% fall on Wednesday evening (the worst session since the beginning of August), the US indices, which averaged +0.5% around 7.55pm (mid-session) and then +0.4% around 9.40pm, lost it all in the last quarter of an hour.

The S&P-500 ended down -0.09%, at 5,867 (i.e., the highest level since January).867 (i.e., the lowest of the day, but also since November 15, i.e., 1 month's rise wiped out in 48 hours), the Nasdaq Composite dropped -0.10% (to 19,372, the lowest since December 3) and the Dow Jones escaped in extremis from an 11th consecutive session of decline with a very symbolic gain of +0.04%.

The Nasdaq-100 lost -0.47% to 21,110 (the lowest level since December 2, corresponding to the previous zenith of November 11 and the oblique support from the 17.445 on August 5): this underperformance is due to the plunge of Micron -16.2% (disappointing 2025 outlook), Vertex Pharma -11.4%, Cintas -10.5%, but also to a few declines among the 'Fantastic 8' (now united under the acronym BAATMMAN) with Tesla -2%, Broadcom -1.8%, then Microstrategy (-6.6%, with Bitcoin losing -5% below 97.700).

The Russell-2000 continues to fare badly, losing -0.65% to 2,217pts and posting its 7th in a series of 9 down sessions: the index has simply returned to its November 4 levels (6 weeks back).

As for the VIX, which had lurched by +75% on Wednesday, it has only eased by -13% to 24.1 (versus 14 before yesterday, i.e. +72%).

Wall Street was brutally cooled on Wednesday evening by the US Federal Reserve's less accommodating than expected comments on the trajectory of its rates for 2025: instead of the 4 easings hoped for by the most optimistic (from 4.25% to 3.25/3.50%), Jerome Powell suggests that only 2 may remain.

He evokes the entry into a "new phase" of the central bank's policy, marked by more vigilant monitoring of inflation.

And today's figures don't go in the direction of appeasement:
The US economy grew more strongly than expected in Q3, accelerating compared to Q2, according to the third - and final - estimate of gross domestic product published on Thursday.

The Commerce Department announced that US GDP grew at an annualized rate of 3.1%, up from 2.8% in the second estimate and following a 3% rise in Q2.

In a press release, the Administration explained this upward revision by the acceleration in exports, household consumption and federal government spending.

The PCE price inflation index was confirmed at 1.5% gross for the quarter, but at 2.2% excluding food and energy, an upward revision of 0.1 percentage points on the previous estimate.

This comes as Fed Chairman Jerome Powell yesterday made further monetary easing by the U.S. central bank conditional on a positive trend in inflation.

In another sign of strength, leading indicators are back on the rise (+0.3% after 3 months of decline) and existing home sales in the US rose by 4.8% in November, compared with the previous month, to a seasonally adjusted annual rate of 4.15 million, according to the National Association of Realtors (NAR).

According to Lawrence Yun, chief economist at the NAR, ' The momentum of home sales is picking up. More buyers are entering the market as the economy continues to create jobs, housing supply increases over last year, and consumers get used to a new normal with mortgage rates between 6% and 7%.

On the downside, manufacturing activity in the Philadelphia region contracted in December, according to the local Fed survey, with the Philly Fed's diffusion index of general current activity rising from -5.5 in November to -16.4 in December.

Some 33% of companies reported a decrease in general activity this month (versus 23% the previous month), while 16% reported an increase (little change); 47% reported no change (versus 58% previously).

The new orders index fell heavily by 13 points to -4.3, its lowest level since May, and the shipments index dropped by 6 points to -1.9.

In addition, the Labor Department announced a -22,000 drop in new US jobless claims in the week to December 9 (220,000 vs. 242,000 the previous week).

Finally, the number of people receiving regular benefits fell by 5,000 to 1,874,000 in the week to December 2, the most recent period available for this statistic.

On the bond market, Powell's hint of a tighter-than-expected monetary policy in 2025 sent the yield on 10-year Treasuries soaring to 4.565% (and 4.59% at its highest, the worst score since May 30), with the 30-year (+8pts) back above 4.75% (+17pts in 48 hours), for the first time since May 2.

It's as if the FED hadn't cut rates this year, but had planned to raise them 3 times by 25pts: the '30 yr' was at 4.000% on January 2.


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